Denis Levchenko, head of innovations scouting at X5 Retail Group tells us about innovation in the retail market.
First of all, how are you and your family doing in these COVID-19 times?
Denis Levchenko: Thank you, we are doing okay now, looks like we’ve all come through the worst and heading toward recovery, with the vaccination process.
Tell us about you, your career, and how you founded X5 Retail Group.
Denis Levchenko: I’ve got 14 years of project management practice, 10 years – in the field of high-tech business development, startups, innovation, and digitalization. From 2011 to 2017, I was head of the innovation project management department at AFK Sistema group, where he was engaged in the development of new high-tech products and launching new businesses.
Since January 2018 I’m responsible for innovative solutions scouting, analysis, business modeling, and preparation for piloting to improve the efficiency of business processes in retail, logistics, back office, and the creation of new customer experience. Since 2017 the Innovations Department of X5 has estimated more than 2000 startups from Russia, Europe, Israel, China, and the USA and launched more than 150 co-innovation pilots.
How does X5 Retail Group innovate?
Denis Levchenko: We stick to the data-driven method as crucial to business efficiency. X5 already has 500 people working on dozens of big data projects and a total of 2,000 digital technicians in-house. But the company doesn’t have an IT department. The technicians are an integral part of the various product group teams and answer to the product owner in the company, as IT solutions are now an integral part of the sales and marketing process.X5 had launched its Express Delivery service in January that promised to get your shopping to your front doors within 60 minutes after you click “buy” on your phone and the company’s existing online services were almost overwhelmed by the surge in demand.
How does the coronavirus pandemic affect your business finances?
Denis Levchenko: Our online businesses grow by almost 400% in 2020. Before corona, we were making 600 express delivery orders a day. Now we are making 22,000 deliveries a day and it is still growing. We were already projecting 70% growth in digital retail before corona hit. Now the virus is still here and the e-grocery market might double or treble this year.
The corona crisis has accelerated the process after everyone was locked up at home in the summer and forced to buy their groceries online, but the pandemic didn’t create a new trend; it only made the existing ones move faster. The coronavirus (COVID-19) epidemic has been a boon for food retailers. We were already investing heavily into digitalization before the epidemic hit and were half ready when the demand for home delivery went through the roof.
Did you have to make difficult choices regarding human resources and what are the lessons learned?
Denis Levchenko: This year showed us what could we do when united by the common goal. X5 and all our employers have worked hard through all the restrictions period. Businesses showed solidarity to each other and helped those, who suffered from the corona crisis most. We hire fired employees of those companies which were obligated to pause their operations. From the very beginning, we gathered data on everyone infected, analyzed the situation in different areas, and were ready to provide any help needed. Since March we transferred 97% of personnel to work from home, which was possible due to the previous digitalization of company processes.
How did your customer relationship management evolve? Do you use any specific tools to be efficient?
Denis Levchenko: Customer-centric ecosystem requires highly functional and reliable services of identification, storage, and usage of data — unified client profile, which includes a personalization, same identification, and payment services for all X5 businesses and best mobile and digital customer experience.
Things have changed now, as when the customer arrives with his or her shopping list they have already made most of their purchasing decisions and the store doesn’t really “sell” anything, but simply acts as a fulfillment center. The goal of the new strategy is to go back to the beginning of the process where those purchasing decisions are made and be present at all stages on that journey in some form.
Our approach to the customer is changing. Retail focuses on customer fulfillment. Now we are re-engineering all our frontline processes to turn them to the customer’s point of view. That means we are opening new channels to reach the customers. We used to have 15 channels that we could use to reach the customer.